Marijuana Economics – All Eyes Should Be On The Oregon/Washington Border

There are four states that have legalized recreational marijuana (and D.C.!) so far in America. Those of course are Alaska, Washington, Oregon, and Colorado. Colorado was the first to allow recreational marijuana sales (January 2014), followed by Washington (July 2014), and then Oregon (limited sales began October 2015). Alaska is still working out their rules, and Washington D.C. doesn’t allow sales (just possession, cultivation,and distribution for no consideration).

Colorado is usually the first place that people look to when it comes to recreational marijuana industry statistics and facts, and rightfully so since it was the first place to allow sales and is considered by most to be the ‘top state’ for marijuana. However, there’s something particularly intriguing about Washington and Oregon to me. Unlike Colorado and Alaska, Washington and Oregon both share a border with another legal recreational state (each other, obviously).

To me, that presents some very interesting learning opportunities. We get to see in real time how one state’s marijuana law and industry rule changes affect another state’s industry. The state’s that border Colorado likely won’t be changing their marijuana laws in the immediate future, and Alaska is bordered by Canada and water, so the Washington/Oregon border is the first and only place where we will see a lot of things happen. It’s like getting a glimpse into the future.

A very, very brief history lesson. Washington and Oregon both have had some of the best marijuana around for several decades. The ‘black market web’ if you will is very old and established in the Pacific Northwest. Washington sales started, and prices were ASTRONOMICALLY high at recreational stores. As more stores opened, and more supply hit those stores, prices dropped a lot in Washington, from as high as $30 per gram, to the current average of just over $10 per gram. Part of the price drop is also attributed to changes in taxes on marijuana in Washington.

In October things got very interesting along the border, as Oregon started allowing limited recreational marijuana sales of flower, seeds, and clones. The flower in Oregon was sold tax free, which made it much cheaper on average compared to on the other side of the Columbia River in Washington. So much cheaper that once very prosperous Washington recreational marijuana stores along the Washington/Oregon border started to feel the pinch from customers going to/remaining in Oregon rather than making their purchases in Washington.

That dynamic is going to shift once again tomorrow when a temporary 25% sales tax goes into effect in Oregon, raising the prices on flower. Oregon still does not allow recreational sales of concentrates, topicals, edibles, consumables, etc. whereas Washington does. Oregon allows home cultivation of recreational marijuana, whereas Washington doesn’t. Expanded sales will be coming to Oregon in 2016, and there’s going to be a big push to allow recreational cultivation in Washington in 2016. Whether it will happen or not depends on a lot of things. Hopefully it does, since Washington is the only legal state that doesn’t allow home cultivation.

I am a total policy wonk, and took economics courses as electives in college. That by no means makes me an expert, but it does make me a huge nerd when it comes to this stuff. It’s very exciting times from that perspective along the Oregon/Washington border. Every thing is in flux, and it’s very interesting to see how changes in one state affect the other state. 2016 will hopefully see more states added to the legalization list, and it’s possible that the entire West Coast and Nevada and Arizona (and maybe even New Mexico via legislative action) could legalize. How would that affect things in Oregon and Washington? How would that affect Colorado? It’s tough to say for sure, but I think a lot of insight can be gained by looking to the Oregon/Washington border in 2016 and seeing how things unfold.

Anyone notice that Portland is at 2% occupancy? Place is crawling with non-residents and recent transplants. Rent on residential property far eclipses the mortgages but the property values skyrocketed none-the-less. Had we put residency restrictions on both recreational and medical licensing, as well as employment of 2 years, maybe, just maybe there would be less of a “oregon land rush” going on.

Over 70% of the dispensaries and extractors have been in the state for less than 24 months. The biggest clients of the cannabis lawyers and accountants are from other states…and it’s no secret that we have silicon valley money floating around inside the business conventions and mixers here in Multnomah county and certainly elsewhere around the state.

Vancouver residents, if I were Governor of Oregon, would see a 25 cent toll on both the I5 and 205 inbound bridges and extra state income tax on their paychecks they receive within Oregon. Time to reel in the free ride of no sales tax, no income tax while they muddle up our roads. Our businesses will do just fine because the people who can’t afford a quarter aren’t the ones spending money here anyways.

As Governor, I’d also make residency restrictions on buying property, especially commercial, to help deflate the crunch on residents trying to find home to buy. Another drought year in Cali is going to really make it suck here fast.

It will be interesting to see the price wars that begin to emerge along the border and what quality will be sold more often. I believe there is a reasonably sized untapped market of those who wish to partake of mids and are not terribly interested in the absurd potencies that now litter the market.
I think many of us are looking forward to the day where prices become near the cost of a pack of cigarettes or a half rack of good beer per 7g. That day is faster approaching than most think as this snowball continues to gain momentum.

No offense to the dudes behind “cannaibisbenchmarks,” but they seem to err by excluding the ladies. We’re talking here about an industry increasingly managed–for the benefit of all–by women. I prefer the wisdom about cannabis “economics” being imparted by Giadha DeCarcer and her team at New Frontier Financials. Que bonita!

LOL…$12/g rec and $10/g med represents the tax. Prices shouldn’t change much due to this regulatory change. The OHA advised dispensaries to preincorporate the tax rate on Oct 1.

Price increases are most likely going to come from pesticide issues as growers become scrutinized much more heavily than before. There is going to be increasingly more people effected with pesticide tolerant mites and mildews as well as root rots and the emergence of new pests.